2009 (7) TMI 1030 - AT - Central Excise

Summary

Issues:
- Availing excess credit of duty paid on capital goods
- Demand of interest on the excess credit availed and utilized

Analysis:
1. The appellant availed 100% credit of duty paid on capital goods in the year 2003-2004, instead of the permissible 50%. Subsequently, they reversed the excess credit on 1-4-05. The dispute in the appeal revolves around the demand for interest amounting to Rs. 42,377. The authorities confirmed the interest on the grounds that the excess credit was not only availed wrongly but also utilized by the appellant.

2. The judgment refers to Rule 14, which states that if credit is utilized wrongly, the manufacturer must repay the amount along with interest. The provisions of Section 11AB of the Central Excise Act apply for such recovery. In cases where the excess credit remains unutilized in the Modvat account, interest may not be levied. However, in this instance, the appellant utilized the excess credit for duty payment on their final product. This utilization triggers Rule 14 and, consequently, Section 11AB, as the clearance without payment of duty is akin to a violation attracting interest.

3. The judgment concludes that had the appellant not availed the excess credit, they would have had to pay the duty in cash. The act of utilizing the credit implies that clearances were made without duty payment, invoking Section 11AB. Therefore, the court found no grounds to interfere with the lower authorities' decision to confirm the interest amount. Consequently, the appeal was rejected.

This judgment emphasizes the importance of adhering to credit utilization rules and the implications of utilizing excess credit, particularly in the context of duty payment and interest liabilities.